India-France Fighter Jet Deal Hits Problems: Report

IndiaTimes

April 06, 2013

NEW DELHI: India's negotiations with France's Dassault Aviation on a $12-billion deal for Rafale fighter jets have stalled due to disagreements over the production of the planes in India, a report said Friday.

The defence deal, one of the biggest ever, was to see the manufacture of the first 18 of the jets in France with the remainder to be produced under licence by Hindustan Aeronautics Limited (HAL), a state-run Indian aerospace behemoth.

The Indian Express newspaper, citing anonymous sources in its report, said that Dassault had refused to take responsibility for the 108 jets to be manufactured by HAL, sparking a row with New Delhi.

The French firm reportedly told Indian officials that New Delhi would have to negotiate two contracts, one with Dassault for 18 fighters and the other with HAL for the remaining 108 aircraft.

The defence ministry "completely rejected this suggestion and made it clear to Dassault that it (the French company) will be solely responsible for the sale and delivery of all 126 aircraft," the newspaper reported, citing sources.

Dassault is thought to have reservations about the ability of HAL, a firm renowned for its inefficiencies, to handle the complex manufacturing and technology transfers which are a crucial part of the deal.

The snag could further delay the conclusion of the deal, which has been under negotiation for more than a year. Dassault had hoped to sign the contract in 2013.

Experts point out that HAL has several existing licence deals with foreign firms to produce the British-supplied Hawk trainer aircraft, Russia's SU-30 multi-role fighter jets and European helicopters.

It is also Dassault's partner in upgrading the Indian army's French-made Mirage-2000 jets.

Dipankar Banerjee, a retired major general and expert at the Institute of Peace and Conflict Studies in New Delhi, said that the disagreement with Dassault was part of the ongoing dialogue process.

"With such a large number of aircrafts, the country would have the right for domestic manufacturing, under licence. It has to be part of the deal. But it's a major issue in the negotiation process," he told AFP.

Dassault has pushed for greater control over the production process in India, including the right to name suppliers, and fears being hit with severe financial penalties if production fails to meet the targets in the contract.

The Rafale beat off stiff competition from six rivals from Russia, the US and Europe last year when India selected the French fighter to replace its ageing fleet.

Its main rival, the Eurofighter made by European group EADS, has remained in India and is still hoping to bag the deal in case Dassault is unable to conclude the negotiations successfully.

A Dassault spokeswoman said she was unable to comment immediately on the report when contacted by AFP.

The Indian defence ministry did not return calls.

The Rafale has carried out bombing missions in Afghanistan, Libya and most recently in Mali, where it is currently flying sorties targeting Islamist militants.

India's air force chief said in February that the country hopes to sign the deal with Dassault Aviation by the middle of the year.